BOJ edging towards easing
Global equity markets continue to remain under downward pressure in the near-term undermined in part by uncertainty over whether the Fed will begin to raise rates next week, notes Bank of Tokyo Mitsubishi (BTMU).
"More risk-averse trading conditions are helping to support a stronger yen as speculative short positions have been cut back sharply. It is outweighing for now the potential positive impact for USD/JPY from higher US yields. Japan's current account balance has also improved materially offering more support for the yen," BTMU adds.
"The BoJ are likely to acknowledge that downside risks to external demand have increased at next week's policy meeting although are unlikely to ease policy further. Over the last week expectations have been building that the BoJ could ease policy further in autumn in response to the deteriorating outlook for growth and inflation which is helping to dampen scope for the yen to strengthen further in the near-term," BTMU projects.
"As a result market participants will be watching closely comments at next week's press conference from Governor Kuroda for any potential signal that the BoJ is moving closer to easing policy further before year end which could weigh on the yen," BTMU adds.
BTMU sees USD/JPY trading in 119-122.50 range over the coming week.
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